Tight market puts squeeze on budgets for Larimer County renters

One in three Larimer County households spends more than half its income on rent.

Dec. 19, 2013

Vega Lange, 6, watches TV in the apartment she lives in with her mom, Hayley Carson, and her younger brother in Fort Collins on Thursday. photos by Erin Hull/The Coloradoan / photos by Erin Hull/The Coloradoan

As a newly divorced mother of two, Hayley Carson visited apartment after apartment while trying to find a home for herself and her kids.

Few two- or three-bedroom apartments in Fort Collins rented for less than $1,000 per month, and most landlords wanted potential renters to earn three times that to qualify. Rentals, Carson found, were slightly out of reach.

Her $35,000 salary as a first-year teacher was just beyond the income limits to qualify for public housing assistance but less than what most other apartment complexes wanted tenants to earn.

“It was very frustrating to know that I was working full time, going to school full time and still found myself unable to provide a safe place to live that fit our needs,” said Carson, 37. “It felt like I did everything right and still couldn’t make ends meet.”

Carson eventually convinced the owner of a townhome in the middle of Fort Collins that she made enough to get by, and she signed a one-year lease to pay $995 per month on a two-bedroom unit, including trash and water. She pays the electric bill.

Carson was spending about 33 percent of her gross income, including modest child support, on rent — a threshold that put her among a rising number of cost-burdened renters, or households that pay an excessive share of their income on housing. The general rule of thumb, for both renting and owning, is to spend no more than about 30 percent of your income on housing, although many experts have bumped that number to 35 percent given current economic conditions.

Even at that increased guideline, more Fort Collins residents are struggling to put a roof over their heads in a rental market that tightened through the recession as jobs disappeared, incomes dropped, homes lost their value and foreclosures increased. Few new units were built, even as more people needed rental housing. That squeezed Larimer County’s vacancy rates to record lows and rents to near-record highs.

A common problem

Larimer County is hardly alone in its housing cost struggle. A new study conducted by Harvard University’s Joint Center for Housing Studies indicates that the ranks of cost-burdened renters increased after 2007, when the recession hit with a fury.

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The number of renters paying more than 30 percent of their income for housing rose 12 percentage points during the decade, reaching 50 percent in 2010, the study said.

Much of the burden fell on lower-wage earners — 27 percent of whom spent more than half their incomes on rent.

“These levels were unimaginable just a decade ago, when the fact that the severely cost-burdened share of nearly 20 percent was already cause for serious concern,” the report said.

Today, spending 35 percent of income on rent, like Carson did until recently, is considered only slightly rent-burdened, said Ryan McMaken, an economist for the Colorado Division of Housing.

“Being a single mom on a teacher’s pay is — as you can imagine — no easy feat,” said Carson, who left teaching to find a a better wage to help support her family. Today she works as director of marketing and events for High Country Harley-Davidson in Frederick.

According to the American Community Survey for 2007-11, nearly one in four Colorado renters spent more than 50 percent of their gross income on rent. In Larimer County, 17,669 households — 45 percent of all households — pay more than 35 percent, and one in three pays more than 50 percent.

That makes Larimer County the third-most rent-burdened county in the state, behind Boulder and Pueblo, according to the ACS. Boulder is first due to its limited supply of housing and lack of land on which to build more. Pueblo is burdened for an entirely different reason: Housing is plentiful, but incomes are much lower.

Fort Collins finds itself among the top three, McMaken said, because a lot of people stay here. “Fort Collins is also blessed with good job availability, but there’s a mismatch in rent versus income.”

Although Fort Collins and Loveland have room to build more units, builders within each city haven’t built as much as they could until now, he said. “Fort Collins/Loveland is one of the most active in the state for new units ... they’re doing a lot of construction and given enough time — and if demand levels out — we will see some moderation.”

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With more than 3,000 units either under construction or in the pipeline for Fort Collins, the shortage of available apartments should start to ease. That in turn, will force rents to drop. But the problem won’t go away any time soon, said Bruce Hendee, the city’s chief sustainability officer. “That’s partially due to population growth in the community and the increasing population at CSU. Those two factors will drive a pretty steady market for some time to come.”

Affordable housing remains a priority for the city. “There are a lot of people who are one paycheck away from being out of a home,” Hendee said. Most poverty experts agree that having stable housing is one of the most important routes out of poverty.

“The other part is the affordability side and the inventory of housing, which continues to be a challenge,” Hendee said.

Tracy Mead, of the Education and Life Training Center in Fort Collins, believes the solutions are as multifaceted as the root causes of the problem. “Personally, I don’t believe we can build enough housing to solve the problem,” she said. “We have to look at the root cause and address the poverty issues.”

At the end of September, the average rent in Fort Collins and Loveland was $1,043 per month, with two-bedroom units renting for more than $1,100, according to the Colorado Division of Housing.

“For those who are struggling ... the way wages have been pretty flat, and as rent increases, it further erodes their paycheck,” said Martin Shields, regional economist for Colorado State University. “It doesn’t leave a lot of money for other things. If you’re paying 40 percent of your paycheck on rent, it doesn’t leave a lot of money to buy food, maintain a car, provide child care so you can go to work.”

To the extent that it affects the entire economy, Shields said, if people are paying an excessive amount for rent, they’re not buying goods that are subject to the city’s sales tax, which funds city services; if they don’t have money for health care, they might be treated in the emergency room; and if they aren’t able to pay rent, they might go on public assistance. All of which become the community’s problem through higher health care bills and increased tax money spent on social services, he said.

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It’s no surprise the situation is more dire for lower-wage earners. The less a household makes, the more rent-burdened it is likely to be. According to the ACS, 15,667 Larimer County households making less than $35,000 pay more than 35 percent of their income toward rent. The number drops precipitously as income rises. That’s to be expected.

“People who make a lot of money leave the universe of rental housing and that skews the numbers,” McMaken said.

A question of math

Between 2009 and 2012, Larimer County added about 6,300 jobs, 1,800 of which pay between $10 and $15 an hour; 3,800 pay less than $20 an hour, the region’s median wage, Shields said.

Consider the single-parent family with two kids, working a $12 hourly job. The wage is well above Colorado’s minimum wage of $7.78, and translates to $24,960 a year. With the average annual rent at just about $11,000 a year for a two-bedroom, two-bath apartment, the household would be paying 44 percent of its income in rent. Even with a rent of $750, the household would still be paying 36 percent of its income on rent.

“We are adding jobs. OK, but they’re paying less than median wages, and rents are certainly appreciating here,” Shields said. “Economic growth in the region is not necessarily keeping up with rent appreciation.”

The National Low Income Housing Coalition estimates the average hourly wage among renters is $14.32 — less than the $18.79 average needed to cover housing costs without overextension.

“That means affordable housing for low-income renters is still out of reach,” the Out of Reach 2013 report states.

In Colorado, the fair market rent for a two-bedroom apartment is $897, according to the report. In order to afford that rent without paying more than 30 percent of income on housing, a household must earn $2,992 per month, or $35,898 a year. That translates into a housing wage of $17.26.

That’s less than Carson earned teaching. But even now with a higher income, adding in utilities, day care, food and gas, money is still tight, she said.

“When I was married, had a house and a husband, it didn’t seem like that big a deal,” she said. “When I struck out on my own and was no longer a homeowner, holy crap. If you’re a one-income or low-income household, I don’t know how people get by.”